Development and Climate Change: A Conversation with The World Bank

As the world's largest source of concessional finance to developing countries, the World Bank plays a critical role in helping these countries take the necessary actions, often including difficult trade-offs, to achieve effective development and poverty reduction, while moving toward environmental sustainability. The Bank has become the largest single source of finance for environmental investments, technical assistance and capacity building in developing countries. More recently, the World Bank has been asked to manage the world’s largest new source of concessional resources to stimulate low carbon and climate resilient growth, the Climate Investment Funds, including the Clean Technology Fund.

On April 16, the Environmental and Energy Study Institute (EESI) held a Congressional staff-only briefing to examine the World Bank’s role in development and climate change. Globally, there remains a large gap in living standards between developed and developing countries. Indeed, 1.6 billion people in the developing world are still without electricity and other basic energy services. This gap is seriously and urgently exacerbated by climate change. Economic development needs to embrace critically needed low carbon and climate resilient development and other sustainable approaches. Developing countries will be affected the soonest and the most by climate change, and they are the least prepared to deal with it. The World Bank, with its mission to help countries in the developing world enhance economic growth and reduce poverty, is at the center of international efforts to work with developing countries as they confront the challenges of climate change.

• Climate sustainability, including both adaptation and mitigation measures, is a new dimension to the World Bank goal of “sustainable development.”
• Development is one of the main challenges of climate change because it requires energy. 1.6 billion people do not have access to modern energy.
• Low -carbon energy project finance has grown from 17 percent of the World Bank’s energy portfolio in 2003 to 40 percent in 2008.
• The World Bank has two Climate Investment Funds. The Clean Technology Fund (CTF) finances large scale demonstrations, deployment and transfer of low-carbon technologies and totals about $5 billion in pledges, The Strategic Climate Fund finances targeted programs that pilot new approaches with potential for scaling up and accounts to $1 billion.
• The CTF supports programs involving renewable energy and energy efficiency of energy supply and demand, and improved transport sector efficiency and modal shifts.
• Coal-related projects must meet CTF investment criteria such as significant greenhouse gas emissions savings, cost-effectiveness, replication at scale, and additional costs/risks premium. Additional screening requirements for new coal power plants include being highly efficient and carbon capture and storage ready.
• The World Bank uses result frameworks to ensure projects are meeting goals and timelines.
• The United States is $160 million behind in funding for the Global Environmental Facility, the main financial mechanism for the United Nations Framework Convention on Climate Change (UNFCCC). Meeting our commitments will give the United States more credibility at the UNFCCC negotiations in in Copenhagen in December 2009.
• The United States plans to fulfill its pledge as the top contributor, at $2 billion, to the CTF.